I can see why libertarians might be opposed to all welfare spending on Randian or Nozickian grounds, but I find it hard to see why they think a welfare state should try to discriminate between deserving and undeserving.

Was just at ol' Davidson last night, for a talk. Got to walk past the ol' frat house.

By happy circumstance, got an email from an ol' frat brother, John O. He writes:

With the national elections looming, I know that some friends don't like
to get political emails. I also think it is important to share
information if we arrive at informed conclusions, so that our friends
may benefit. After all the debates, platform analysis, and political
punditry I have made my choice as to the best candidate in the field.
Rather than vote according to just one issue, or an ideology, or a party
ticket, I am voting for the principles and character of "The Man" who
tells it like it is, no holds barred. Here is his campaign video. Take a
minute to listen to his timely message.

Interesting. I had never noticed how much like "I want to be sedated," by the Ramones, this chorus is. But if I get one more Robo-call from some Romney shill, I may need to be sedated. Or restrained.

"A California businessman chartered a fishing boat in July, loaded it
with 100 tons of iron dust and cruised through Pacific waters off
western Canada, spewing his cargo into the sea in an ecological
experiment that has outraged scientists and government officials...The
entrepreneur, Russ George, calling it a 'state-of-the-art study,' said
his team scattered iron dust several hundred miles west of the islands
of Haida Gwaii, in northern British Columbia, in exchange for $2.5
million from a native Canadian group. The iron spawned the growth of
enormous amounts of plankton, which Mr. George, a former fisheries and
forestry worker, said might allow the project to meet one of its goals:
aiding the recovery of the local salmon fishery for the native Haida.
Plankton absorbs carbon dioxide, the predominant greenhouse gas, and
settles deep in the ocean when it dies, sequestering carbon. The Haida
had hoped that by burying carbon, they could also sell so-called carbon
offset credits to companies and make money." [NYT]

Thursday, October 25, 2012

I do often hear my climate catastrophe worshipping colleagues say that some people are just too darned stupid to understand how smart my colleagues are. Meaning that this whole "democracy" thing is a problem. Voters should shut up and do what experts tell them to do.

Abstract: Seeming public apathy over climate change is often attributed to a
deficit in comprehension. The public knows too little science, it is
claimed, to understand the evidence or avoid being misled. Widespread
limits on technical reasoning aggravate the problem by forcing citizens
to use unreliable cognitive heuristics to assess risk. We conducted a
study to test this account and found no support for it. Members of the
public with the highest degrees of science literacy and technical
reasoning capacity were not the most concerned about climate change.
Rather, they were the ones among whom cultural polarization was
greatest. This result suggests that public divisions over climate change
stem not from the public’s incomprehension of science but from a
distinctive conflict of interest: between the personal interest
individuals have in forming beliefs in line with those held by others
with whom they share close ties and the collective one they all share in
making use of the best available science to promote common welfare.

Wednesday, October 24, 2012

Abstract:
In an influential paper, Acemoglu et al. (2008) find that the positive
correlation between income per capita and the level of democracy across
countries vanishes once country-specific effects are accounted for. In this
paper, we find evidence of a non-linear effect from income to democracy even
after controlling for country-specific effects. In particular, our findings
point to the existence of a positive effect only in low-income countries.

Argentina has now passed a decree allowing the government to direct both the amount and the type of investment behavior of private insurance companies. Here's the scoop from the AP (via Fox News so you KNOW it's true):

she (President Christina Kirchner) decreed that insurance companies must invest up to 30 percent of their holdings in "productive activities" to improve Argentina's infrastructure.
"This decree links the insurance industry with the development of the actual economy," said the decree published Tuesday. With her government redirecting resources toward "projects that have a clear productive and social purpose," insurers will "encounter new possibilities of investment that that will feed a virtuous cycle of development with social inclusion," it said. The decree, effective Wednesday, puts Deputy Economy Minister Axel Kiciloff and Commerce Secretary Guillermo Moreno in charge of a committee that will decide where the insurers can invest their holdings. The list begins with projects already sponsored by the nationalized pension system and other government-run funds, but also can include whatever the committee decides is "productive, according to the objectives of the political economy." Economy Minister Hernan Lorenzino said Argentina's insurers are sitting on $13 billion but put only $18.5 million in what the government considers productive projects. The government hopes to raise that to $1.5 billion by mid-2013.
This "will be good for the national economy and for the insurance sector as well, since these investments have proven to be the best in terms of profits and security in recent years," Lorenzino said in a radio interview.

That's right, private money decreed to go to either "infrastructure" or projects with a "clear social purpose".

Gee this sounds like a great idea. Win-Win-Win. I wonder what other Argentine investors think?

Abstract:
We examine empirically the relationship between crude oil prices and the ebb
and flow of democratic institutions, in order to test the hypothesis that
high oil prices undermine democracy and sustain autocracy. We use a variety
of time series and panel data methods over a wide range of country
subsamples and time periods, finding strictly no evidence in favour of this
so-called ‘First Law of Petropolitics’ (Thomas Friedman 2006).

Monday, October 22, 2012

However, even if we are not modeling GARCH in Mean effects, ignoring conditional heteroskedasticity, or "correcting" our coefficient standard errors for it by a White-type of correction can be problematic.

For one thing, a maximum likelihood approach can have almost infinite relative efficiency gains over OLS. Thus in a VAR context, ignoring the conditional variance-covariance process, can lead to poorly estimated coefficients and thus poorly estimated impulse responses.

For another, White (or Newey-West) standard errors are not generally appropriate in the case of a GARCH variance process.

This is a situation I've seen in my own work. Here is an older piece with Mark Perry in the Journal of Finance about liquidity effects, and here is a joint piece with Haichun Ye in Economic Inquiry about the twin deficit phenomenon. In both cases modeling the conditional variance process changed inferences about the conditional mean.

Here is a recent piece by rising macro star Olivier Coibon in the AEJ: Macro which also demonstrates the importance of modeling the conditional variance process.

GARCH (or Stochastic Volatility if you prefer) in macro is still way under appreciated and under used.

Sunday, October 21, 2012

So, I get this phone call at 7 am Saturday from the YYM: "I got pickpocketed in the Lisbon train station."

He still has his passport, and he is with his girlfriend so he has access to cash. But it is worrisome. Apparently the two of them had "met" this aggressive woman who stood very close to them and asked for directions. Presumably confederate behind him reached and took the wallet.

From his front jeans pocket? Because that is where I always tell him to keep his wallet in train stations and public place: keep your wallet in your FRONT jeans pocket. Make them "kiss the dog."

No, it was in his outside jacket pocket, the big open one where you put your hands. *&$^#$&^@!

Later in the day, he sent this picture, after they had rented a car and driven over to the coast. Things must not be TOO bad...

The piece starts with a remarkable display of selective amnesia. Romer says,

After listening to Representative Paul Ryan in the vice-presidential debate, you might think that careful evaluation isn’t needed. In his view, we spent $800 billion on the stimulus, yet unemployment still rose to 10 percent — so obviously it wasn’t helpful.

She then goes on to (correctly) point out that to evaluate a policy, we actually need the counter-factual, what would have happened without the policy in question.

But she ignores the counterfactual elephant in the room:

Which of course arrived to us in a document authored by... Christina Romer (and Jared Bernstein)!

Even more amazingly, she says the stimulus would have worked better if people would have believed in it more! In most circles, this is known as blaming the victim, not economic analysis.